Posting a Bill for Import Duty and VAT (UK)

[RobJoy]

You can enter a bill for import VAT and duty with two lines under the Expenses tab:

The first line has the your Import Duty account - an asset, COGS or expense account, it does not have to be exclusively used for import duty. Just enter the amount of duty under Nett, with the VAT code blank - duty is outside the scope of VAT, so you want it left out of your VAT reporting altogether.

The second line has no account, VAT code S, no (or zero) amount and the amount of import VAT. This will just be posted to the VAT control account.

Your vendor - HMCE - now has a Bill for the total for you to pay in the usual way.

[cocolala]

Hi, 2 of my imported products are taxed by Custom. Do I follow your way, just record a lump sum of the tax amount, or do I need to assign the tax amount to the 2 products as cost?

[RobJoy]

I need to update this faq for current versions of QB - will do so when I have a minute.

In answer to your specific question, duty is certainly a direct cost of purchase, so it should form part of the cost. But it really depends on your circumstances how you deal with it.

If you import only to order for items you will sell immediately you could simply post the duty to a COGS account so it is recognised as a cost of sale at the time of purchase. This has the advantage of simplicity, but it means that the profit on the invoices is overstated - it doesn't take account of the duty. The gross profit on your P&L will be right, provided the purchase and sale take place within the same period.

If you are importing for stock - you will have at least some of the imported goods for a while - then you should adjust the unit cost to take account of the duty.

E.g. you buy 100 widgets @$5 each and are charged £7.50 total duty. Supposing an exchange rate of $1.55/£ you need to post a zero-value bill: expense line to the duty account, minus 7.50
item line 1, quantity minus 100, value -322.58
item line 2, quantity plus 100, value +330.08
This will have the effect of taking the duty value out of its original account and moving it to Stock Asset, by increasing the unit cost, without changing the quantity.

[cocolala]

thank you so much! Now I understand how to do it. It's similar to the freight charge that I have to distribute evenly to each product as COGS. :)